Mississippi Withdrawing Lawsuit Over Flood Insurance Rates

Mississippi’s insurance regulator is withdrawing his lawsuit against the federal government after Congress voted to delay changes to the federal flood insurance program.

Mississippi Insurance Commissioner Mike Chaney said he is withdrawing the suit aimed at stopping flood insurance premium increases mandated under a 2012 reform law. In March, Congress passed a new law — The Homeowners Flood Insurance Affordability Act— rescinding many of the increases.

Chaney said he would refile the lawsuit against the Federal Emergency Management Agency that administers the flood insurance program if the latest changes in the flood program prove to be unsatisfactory.

“I am very happy that Congress has acted to protect homeowners,” said Chaney. “However, we will have to watch FEMA’s implementation of it to be sure it actually fixes the problem.”

Chaney filed the suit last September against the federal government over the implementation of the Biggert-Waters Flood Insurance Reform Act of 2012. The act was designed to shore-up the flood insurance program’s finances, which had been depleted following hurricanes Katrina in 2005 and Sandy in 2013.

Biggert-Waters called for new maps that substantially increased the geographic areas where homeowners must have flood insurance. In addition, Biggert-Waters began a phase-out of premium subsidies on properties built before 1974, new policies, second homes. These reforms led to double0digit increases for many property owners in flood zones

In Mississippi, 14 percent of homeowners in the flood program currently are subsidized.

Chaney said that without the subsidies many homeowners could see their flood premiums increase by as much as 3,000 percent, which he said is unaffordable for many policyholders. The increased flood premiums also hurt home sales, since any potential homeowners would have to pay full flood insurance rates.

The latest law caps annual increases in premiums at 18 percent on most policies. It also repeals the provision that homebuyers must pay the full flood insurance rates when they purchase a home or purchase a policy for the first time. Homeowners who already paid the higher Biggert-Waters rates will be eligible for refunds under the new law.

FEMA is in the process of developing rules for rate rollback and refunds.

Florida, which along with Alabama supported Mississippi’s lawsuit, also welcomed the rate relief passed by Congress.

“We’re pleased that Congress passed and the President signed into law new price guidelines that provide a glidepath so that the NFIP will be more affordable to Florida consumers,” said Office of Insurance Regulation spokesperson Harvey Bennett. “Like Mississippi, the office is awaiting FEMA’s new rules to ensure they meet the intent of Congress and the states that joined the lawsuit, in providing consumers relief.”

Florida had estimated that 250,000 homes would have been negatively affected by Biggert-Waters.

Biggert-Waters also prompted state lawmakers to turn to private markets for flood insurance. Currently, the state legislature is considering several proposals to create a regulatory framework to encourage private insurers to offer flood insurance products.